9. Operations management (A Level)
A section of Business Studies, 9609
Listing 10 of 19 questions
Quality Leather (QL) QL is a worker co-operative. It is equally owned by ten owner-workers and was set up five years ago. QL produces bags, cases and wallets made from leather material. The goods are produced in a small factory using batch production methods. In the last three years QL’s revenue and profits have increased significantly (see Table 1). Table 1: Selected financial data for the last 3 years ($000) Revenue Cost of sales All other expenses The owner-workers elected Iqbal as the leader of the co-operative. Iqbal is a democratic leader with high levels of emotional intelligence. He is good at listening to the opinions and concerns of the other owner-workers. He makes sure that all major decisions are discussed and voted on by each worker. Due to the success of QL, the owners are considering expanding by producing either high priced leather shoes or low priced leather belts. Information about these two options is shown in Table 2. Table 2: Information about the two options Option A: High priced leather shoes Option B: Low priced leather belts • Total market value of $2 million • Branding is more important than the quality of the product • Demand is price inelastic • High level of competition • New production machinery would need to be purchased • Requires new distribution channels • Total market value of $400 000 • The quality of the product is more important than branding • Demand is price elastic • Medium level of competition • No new production machinery would need to be purchased • Could use QL’s existing distribution channels Define the term ‘batch production’ (line 3). Briefly explain the term ‘co-operative’ (line 1). Refer to Table 1. Calculate the gross profit margin for 2016. Explain the importance of profitability to QL. Analyse one advantage and one disadvantage to the other owner-workers of Iqbal’s leadership style. Recommend which option QL should choose for expansion. Justify your choice.
9609_s17_qp_22
THEORY
2017
Paper 2, Variant 2
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Yondis Phones (YP) YP is a public limited company that manufactures mobile phones. YP’s phones are sold to large retailers who then brand them as their own products. YP uses a capital intensive flow production process. Computer aided manufacturing (CAM) and mass customisation allow YP to produce different designs of phone on the same production line. YP’s managers have differing opinions about the recent success of the company. The Operations Director, Khan, is pleased with the economies of scale from which YP benefits. However Jay, the Finance Director, is worried about the liquidity position. Table 2: Liquidity indicators Current assets including inventory ($000s) Current assets excluding inventory ($000s) Current liabilities ($000s) Current ratio 1.0 1.0 Acid test ratio 0.5 X YP has only sold phones to national retailers, but an opportunity has arisen to sell into another market, country A. A large retailer from country A would like to make regular purchases from YP. Khan knows that YP can increase production to meet this demand by introducing a new production line. However YP would also need to gain more international business to make this new production line profitable. Faye, the Marketing Director, has no experience of international markets and is concerned about the differences between marketing to national retailers compared to retailers in other countries. Define the term ‘capital intensive’ (line 3). Briefly explain the term ‘flow production’ (line 3). Refer to Table 2. Calculate the value of X. Briefly explain the changes in YP’s liquidity position. Analyse two economies of scale from which YP may benefit. Discuss the advantages and disadvantages to YP of selling phones to the retailer in country A.
9609_w16_qp_23
THEORY
2016
Paper 2, Variant 3
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Questions Discovered
19